MBA case competition explores retail challenges, opportunities

As long as a business is operating in the black, an outside observer might say there is little cause for alarm. Concerned stakeholders, investors, and shareholders will have a different take if the company isn’t in a secure competitive position, making enough money and leading its industry.

This conundrum was at the root of the School of Management’s MBA case competition, which took place in December. Eight teams of final-year MBA students analyzed the challenges facing well-known retail chains and recommended strategies that would maximize profits and shareholder value. The competition was part of the required capstone course Management 540 (Strategic Management).

Patrick Burnett, Mallory Lawes, Joshua Ludzki and Xinting Mu won the competition for their comprehensive analysis of Best Buy. Although the electronics chain has been making a profit, the students pointed out that revenue growth has dwindled and stock price has declined over the past five years. And, as new stores have been opening, same-store sales have decreased.

“Revenue is going to competitors Amazon and Walmart, as they compete on price.” Ludzki said. “Walmart spent years and piles of money building a world-class supply chain to reduce costs to the consumer. Apple is known for service. They have a trendy vibe and a unique product line.”

The team recommended that Best Buy take a page from Apple’s book by attaching itself to the next hot product. A “store within a store” selling the Google line of phones and tablets could, the team argued, become a viable competitor to Apple and Microsoft. This would, in particular, help Google penetrate an emerging market like China, where Apple only has five stores. If this doesn’t help Best Buy, shareholders should pay attention to founder Richard Schulze’s offer to take the company private, suggested the team.

Jaemin Chang, Kevin Hannon, Melissa Leonard and Lisa Rufer finished second in the competition, with their analysis of home improvement retailer Lowe’s. They recommended that Lowe’s expand with stores in the downtown areas of major cities, a market largely untapped by Home Depot. Also, the team said the contractor segment was another opportunity for growth, pointing out that Home Depot consistently outperforms Lowe’s in this area.

Home Depot also holds a sizable advantage in international markets, and the team recommended that Lowe’s expand overseas by purchasing the Canadian retail chain Rona. The acquisition would enable Lowe’s to quickly become the No. 1 home improvement retailer in Canada, the team said.

“Home Depot has a tremendous advantage over Lowe’s in international markets,” Chang said. “Lowe’s began their expansion in 2007, while Home Depot did in 1994. Being a second mover can have advantages in foreign markets, and Lowe’s can avoid the pitfalls that Home Depot fell into. This can be an especially attractive option when a company’s home market begins to mature. By going international, Lowe’s can create a buffer against a slumping U.S. economy.”